Don’t Engage Dispute About Unpaid Bills

I’ll share one of my personal experiences for the benefit of everybody. A few years ago, I had a banker position. Everyday, we were seeing credit application followed by individual credit reports. After a while, we have been pretty good at detecting who would qualify or not for a loan.

One day, I had the chance to meet an amazing client: He was making 400K a year, with a very high net worth and a lot of liquid assets such as investment. He was requesting a Home Equity Line of Credit (HELOC) of 350K. We pulled out his credit report while he was still in the office and we got a big surprise:

His beacon score was in the 500 and he was currently R4 on one of his bill. In fact, this credit account was sent to a collection agency for a while. I asked him why a wealthy person like him would be late on one of his accounts?

It’s a lousy ticket story! He replied.

It appeared that he was disputing a ticket for a while with its municipality but didn’t pay in the meantime. “I will pay if I don’t win my case”. The problem is that he was destroying his credit report at the same time.

In fact, the amount of the debt owed doesn’t matter when it comes down to bad credit rating on your credit report. If you owe $35 to a cell phone company or you owe a $250,000 mortgage, it’s exactly the same thing.

The important factor on a credit report is time. IF you have been late for more than 4 months, you will automatically show a R4 on your credit report.

If you are disputing a bill with any company, you are better off paying it and then engage procedures. You might think it’s not their money as you are right. But in the end, you will be penalized severely on your credit score for a small unpaid bill.

If you pay upfront and it has to go further, you will also be able to show good will at the very beginning. So you are not only helping preserving a good credit score, you are helping your case as well.

You may think that the company you are going after might not listen since they got paid. But in the end, can you tell me what really worth a few hundred bucks for a multi billionaire company? Not much anyway;-)